Independent Contractors, Uber, and Employees

| October 15, 2015 | Employment Discrimination

On September 1, a federal judge certified a class action brought by three Uber drivers who asserted that they are employees and not, as the company had argued, independent contractors.   If the court’s decision it holds, it could be a big deal.  This employee vs. contractor determination may sound like arcane law speak, but it’s important, so bear with me.

The bar exam distinction between an employee and an independent contractor is generally that an employer has the authority to control an employee’s performance; in other words, how the work gets done.  An independent contractor, on the other hand, controls how the work gets done herself.

In the quasi-taxi context, companies like Uber typically argue that drivers determine how much to work, when to work, and where to go. In other words, they say, they’re just offering to connect the customer with the contractor; the rest is up to the driver.  On the flip side, the drivers typically point out the myriad mechanisms through which quasi-taxi companies control how work is done—wages, routes, vehicle specifications, qualifications—and argue that these factors indicate that the driver is an employee, regardless of any minimal autonomy.

Why does this matter when it comes to Uber?

First, the determination could have an impact on the way drivers are paid.  Under federal law, workers are generally entitled to overtime compensation, i.e. “time and a half,” for each hour over forty that they work in a week (subject to some exemptions).  If this ruling turns out to apply more broadly, Uber drivers might be entitled to overtime wages for hours that they spend waiting or traveling to fares—time that an independent contractor would typically have to absorb.

Second, if Uber drivers are employees, then national anti-discrimination laws apply to Uber’s employment policies and practices.  Laws such as Title VII of the Civil Rights Act of 1964, which prevents discrimination in the workplace on the basis of sex or race, don’t apply to independent contractors; they apply only to employees.  Application of anti-discrimination laws to Uber could have a major impact.  According to a recent story in Forbes, women currently comprise just 14% of Uber drivers—a percentage that’s not only far lower than the general population, but also lower than many of Uber’s competitors.  The application of these laws to quasi-taxi services could, therefore, encourage women to drive for Uber.  It could also force companies to create better protections against the sexual harassment of drivers by riders.

Third, classifying Uber drivers as employees could entitle drivers to worker’s compensation and health insurance. Forbes recently reported on a slew of incidents in which Uber drivers were assaulted by their customers.  As the article points out, many of these drivers lack health insurance, which Uber says that it doesn’t have to provide because, you guessed it, it’s not an employer.  And when the driver gets assaulted on the job, that usually means that she is stuck holding the bag, because independent contractors don’t get workers comp (The driver might be able to sue the passenger, or the company if the assault was foreseeable, but the burdens of proof involved are greater, even if the potential recovery could be too.).

Fourth, classifying Uber drivers as employees could also make it easier for the public to get compensation when drivers injure others in traffic accidents.  Typically, if a milk-truck driver hits you on your way to work, you can sue not only the driver, but also the dairy. This is important because the driver may not be able to pay for all of your injuries, but the company typically can. In the past Uber has argued that because its drivers are independent contractors, the company is not liable for certain injuries that they may have caused.  Most tragically, for example, in 2013, an Uber driver allegedly killed a 6-year-old girl in San Francisco.  As SFGate put it, “Attorneys for Uber said the ride-sharing company was not liable for the New Year’s Eve death of 6-year-old Sofia Liu in San Francisco, because the driver was an independent contractor and had no reason to be actively engaged with the app at the time.”  Classifying Uber drivers as employees, could, thus, provide greater protections for the public.

I could go on and on, but I think that you get the point.  The court’s decision gives a lot of food for thought. We certainly haven’t heard the last of this.